ECONOMICS

Detailed explanation-1: -A volume variance is the difference between the actual quantity sold or consumed and the budgeted amount expected to be sold or consumed, multiplied by the standard price per unit. This variance is used as a general measure of whether a business is generating the amount of unit volume for which it had planned.

Detailed explanation-2: -The volume variance is also referred to as the production volume variance, the capacity variance, or the idle capacity variance.

Detailed explanation-3: -Fixed overhead volume variance is the difference between the amount budgeted for fixed overhead costs based on production volume and the amount that is eventually absorbed. This variance is reviewed as part of the cost accounting reporting package at the end of a given period.

Detailed explanation-4: -The correct answer is option B. If production volume is less than anticipated, then fixed overhead has been under-allocated and the fixed overhead volume variance is unfavorable. Production volume variance is the amount of variance resulted from the difference of budgeted and actual overheads.